2021-02-09
2021-02-09
Scalping in ForexOleg Tkachenko
Scalp forex strategies are quite popular with beginner traders. High- frequency trading (holding a position for a very short time and closing it for a small profit) allows taking quick real-time profits and avoiding swaps. Training to scalp on a demo-account helps a newbie improve reaction and learn to intuitively understand the behavior of traders in financial markets. However, one had better enter real trades on longer time frames.
The article covers the following subjects:
This article will uncover the secrets of scalping: I will review the most common mistakes and the ways to avoid them and will acquaint you with efficient high-frequency trading (HFT) strategies.
Scalping is a high-frequency trading strategy that is used for making profits from a multitude of trades over a short time period. A scalper is a trader who uses such strategies and conducts a lot of trades intraday.
For traders who are just starting to trade, this trading scalper strategy is considered to be highly risky because the trend is chaotic in the short-term charts (the so-called price noise effect), and therefore, it can be hardly predicted. I, on the contrary, believe that a beginner should train scalping before dealing with middle- and long- term trading strategies. Scalping helps one train attention, reaction speed; it visually shows slippage problems. Although you must be highly concentrated and emotionally stable when using scalping, if you have understood the theory, scalping forex strategy is an excellent simulator for practicing these skills.
What we need to know about scalping
It is quite hard to make money by utilizing such a strategy. Both methods have their own advantages and drawbacks. You can learn more in [this overview][1].
I won’t describe the subdivision by the indicator type (graphic, level analysis, and so on) as it is rather logical. The classification can be extended, and I will appreciate it if you, my dear readers, help me by offering your variants of scalping strategies in the comments following the overview.
Rules for successful scalping trading:
Short-term trading is subdivided into a few types: pipsing, classic scalping, [swing trading, and intraday trading][5]. Which one is better? To answer that question, you need to make a couple of steps:
I have compared several short-term strategies in the table below:
| Scalping | Swing trading | Intraday trading | |
|---|---|---|---|
| Trade lifespan | from 1-2 to 30 minutes | from 15-30 minutes to several | |
| hours | a few hours | ||
| Time frame | М1-М15 | М5-Н1 | from Н1 and longer |
| Trading assets | Highly liquid volatile assets: major currency pairs, |
cryptocurrencies with 3-5% volatility and more. Less often: gold,
stocks| Volatile assets with frequent trend fluctuations| Any assets
Trading tools| Most often, fundamental analysis| Levels, Price Action|
All kinds of technical analysis, fundamental analysis
Trades per day| from 20-30 to 100 in diverse instruments| 5-10-15 trades
a day depending on a trend or corrections| 1-3 trades in one instrument,
5-10 trades a day
Number of trades opened at the same time| 1-3 trades| 1-3 trades
depending on a trend| 1-10 trades
The table will probably help you get a general idea of short-term strategies. Advice: don’t try to stick to strategies too much. Develop your own trading system for scalping Forex, which will cover a few types of trading scalping techniques. Create your individual trading style.
Main scalping rules:
The best time frame for scalping is М5-М15. Other time frames are not appropriate for a few reasons:
So, scalpers most often pick up the M5 time frame. A trade stays in the market for 1-3 candlesticks while the price covers 5-15 points.
For example, three candlesticks yielded nearly 11 points in short positions for 4-digit quotes in the M5 chart of the [EURUSD][2]. It corresponds to 10 USD for a 0.1 lot trade with a spread of 1 point.
Scalping methods mean the general principles of developing trading systems that allow grouping trading strategies. There exist two classic methods:
1. Trading a huge amount of assets in small lots. A trader can open dozens of trades in various assets simultaneously, trying to exploit every small price fluctuation. Profits can go up to several points, but the total result can compare to other trading systems’ efficiency because of the large amount of trades.
Pros:
Cons:
2. Having a few trades with maximum volume. A trader opens 1-3 trades aiming to make a few points of profit. The maximum leverage size increases the trade volume and one point cost.
Pros:
Cons:
Also, there’s one more method: opening opposite trades in the same asset with equal volumes. This method is called “locking”. Beginner trader may find it difficult: you need to exit the lock on time and in the appropriate direction. Locking strategies are more often used for risk insurance instead of stop loss than for making profits.
The most popular Forex scalping strategy is channel trading during high- liquidity assets’ highest volatility period. Graphic elements are often used in scalping, such as drawing levels, Fibonacci ratios, patterns, channel indicators, etc. Strategies are based on price movements inside channels or key levels, or on breakout price movements. Classic technical indicators are used less often, but scalping strategies can include Stochastic, MACD, or some trend tools. A few examples of such strategies are listed below.
One of the best indicators for high-frequency scalping is ADX. It consists of two parts: the main line, which indicates the strength of a trend, and dotted lines, which indicate the price direction. It’s not advisable to use ADX on the M1 time frame in intraday strategies: it produces false signals due to price noise. However, as one-minute scalping does not imply trend trading, ADX helps us catch short impulse movements, which are three-five candlesticks long. More details on this tool can be found in our review [Average Directional Index (ADX indicator)][6].
Currency pairs: any major pair.
Conditions for opening a long trade:
Conditions for opening a short trade:
Ignore the main indicator line: it measures the trend strength, which is of no interest in one-minute scalping. Open a trade no later than the candlestick on which the two dotted lines have crossed each other. Period of one trade: two-five candlesticks. Close the trade once a small profit is made and the price reverses.
In that example, all the six signals were accurate, but each trade’s profitability was 1-2.5 points without considering the spread. So, this strategy will not be suitable for Classic accounts with spreads starting from 1.8 points. I recommend using it in ECN accounts with raw spreads.
You can work further on this one-minute strategy as you think best - add other Forex scalping indicators, change ADX settings, etc. As there can be false signals, I recommend using this strategy for training your skill of searching out signals and controlling trades efficiently. However, I would advise other scalping strategies if you wish to make bigger profits.
Scalping trading strategy based on fundamental analysis without using indicators.
We will need PMI statistics.
Two conditions must be observed for the strategy to work:
The point is that the [EURUSD][2] will start trending if the fact and the forecast are different. If there is no cardinal change, the quotes will remain unchanged.
We had the following market situation on 22 November, the day before PMI stats were published: after the index value was upgraded from 53.3 to 53.4, analysts believed the situation would get worse, and the expected value (the index value) of 53.0 would fall. However, the actual value was totally opposite: PMI grew 3.3% instead of falling 0.4%.
A scalper does not necessarily need to follow the original source at the moment of publication, though it’s advisable. He or she can simply check traders’ behavior. The highest volatility is usually observed in the first five minutes following the news publication. Also, dozens of mass media copy the published stats within the first five minutes. So, wait for the index value to be published, check if the two conditions are observed, wait for the period equal to one candlestick, and open a trade on the next candlestick in the direction of the price.
In that case, the trade can be opened 2-3 minutes earlier because a long downward candlestick, whose body is much bigger than the previous candlesticks’, formed in the chart. Close the trade after the first reversal candlestick ends: it marks the end of a local trend. The trade was held for 40 minutes; the profit was over 45 points on 4-digit quotes.
Similarly, we can earn from other news publications. The release dates can be found in the [Economic calendar][7].
The strategy is based on the channel indicator. The underlying principle of this Forex scalping strategy is that the price almost always returns to its median value after touching the channel limits. Trades are opened in the following situations:
Time frame: M15. Currency pairs: any. You can open several pairs’ charts and open trades one by one once signals appear.
Six trades were opened in 4 hours. The longest candlesticks yielded 8-12 points within 15 minutes, with spreads considered. Without spreads considered, each trade opened in point 6 would have been at least 2.5 points. This strategy is operational but requires constant control over each candlestick and a fast reaction to price reversals.
Advice:
The best scalping indicator is the spread indicator. Spreads are the major part of scalpers’ expenses. They don’t depend on a trade’s duration, and they will be due regardless of the amount of future profits. The lowest spreads are floating spreads in ECN accounts, starting with 0.0 points. When volatility is growing, or key price levels are reached, they can increase. So it’s important that a scalper should not miss the moment.
Use spread indicators not to get distracted. For example, Spread.Warner or Monitoring Spread. They differ from each other in visualization and additional options. The simplest one is Spread Warner. It shows a current spread and previous spread values in the form of a small histogram.
To scalp Forex, you can use regular technical indicators. Let’s examine some of them in detail.
Stochastic is an auxiliary indicator in trend strategies. It is used for confirming a signal and detecting a trend reversal moment. It most often produces signals when leaving the overbought/oversold zones. It’s them that we will use in our strategy.
Input data:
Since scalping is a high-frequency trading strategy, set the level at 60⁄40 instead of the default ones.
Conditions for opening a long trade:
Conditions for opening a short trade:
Open a trade on a candlestick that observes both conditions. If the gap between the two conditions equals one candlestick, you can open a trade, but such a signal is considered as lagging. Don’t open positions if the gap between the two conditions is two or more candlesticks or if MAs converge and then diverge instead of crossing each other.
Both conditions are observed in point 1, but MAs intertwine before crossing. The intertwinement can point to a flat movement that precedes a strong trend or a high volatility area where neither party prevails. In the first case, you can and should earn when a flat movement ends, but the second example points to an uncertain market in which you’d better not open a trade. There started a directed trend movement in point 1, so opening a trade yielded a profit. You can see examples where the intertwinement of MAs was a false signal on the screenshot below.
In points 2 and 3, there were clear operational signals. The difference is that point 2 caught a short-term trend while point 3 - a strong impulse that was one candlestick long. The essence of scalping is exactly in catching such short-term impulses.
Read our review [Stochastic Oscillator: Guide for Using Indicator in Forex Trading][8] for more details on this indicator.
In contrast to regular tools, the [Ichimoku Cloud Indicator][9] uses a more complex formula for plotting lines and can be a basis for an independent trading system. Our review Ichimoku Cloud Indicator in Forex Explained deals with this indicator in detail. I use only one of its signals - the Tenkan-Kijun cross - in this Forex scalping strategy.
Initial conditions:
Conditions for opening a trade:
Open a trade immediately once the lines cross. The price can change direction as early as on the next candlestick on short time frames, so the speed is key to success. Close the trade 1-3 candlesticks later or when a reversal signal is produced.
This strategy does not produce signals frequently. However, you can form more strategies based on Ichimoku if you look into the specifics of this indicator.
Heiken Ashi is a special type of candlesticks visualized in a more convenient way and making a convenient trend change alert. It has a price calculation formula based on an open-high-low-close chart (OHLC), different from classic candlesticks.
Open a trade on the fourth candlestick after the change of color. Currency pairs: any major pairs, time frame: M1-M5.
The arrows mark the candlesticks on which a position could be opened. In the first and the fourth case, a trade could be opened earlier. For example, the first trade could be opened on the first long green candlestick. Those are subtleties, however. Close the trade once a reversal candlestick appears. Note that you don’t have to close a position within the first seconds following the appearance of a differently colored candlestick because it can just continue the main movement. You determine the exit time yourself based on circumstances and the number of profits.
This strategy is based on four basic technical tools combined in a single template: two simple moving averages, [RSI][11] and [MACD][12]. The strategy is classical, based on the principle “Don’t reinvent the wheel, learn to feel the market”. Recommended time frame is M5. The 1-minute time frame will send many false signals, but you can try to search for signals in non-standard time frames from 5 to 15 minutes. Recommended pairs: [EURJPY][4], [EURGBP][13]. They produced the most effective trading signals.
You can download the scalping strategy template via this [link][14].
Settings of the indicators:
The best time for forex scalping is the European session. At this time, these pairs are most actively traded, and market liquidity is the highest.
Conditions for entering a buy trade:
You enter a trade at the next candlestick after the major condition has been met, the MACD has crossed zero level. The rest of the signals in this case are confirming signals, but you shouldn’t enter a trade unless all the conditions are satisfied. The expected profit is five pips, not including the spread coverage. When the target profit is reached, you may hedge the trade by a trailing stop or exit it. The second variant is safer.
Pink boxes and arrows in the chart highlight the indicators’ values that provide a signal when they occur at the same time. Horizontal red lines mark from top to bottom: take profit, entry point, and stop. It is also clear from the screenshot that the trade could have been entered one candlestick earlier. During important news releases, this strategy doesn’t work.
Conditions for entering a short trade:
You enter a trade in the same way: as soon as the MACD breaks through zero level, you may enter a trade.
You shouldn’t count on a big profit. The strategy suggests gaining just a few pips. Signals appear almost every day, so you may trade no more than one or two currency pairs. If you have managed to pick up the start of the trend, the target profit size can be increased.
Unlike other trading systems, this trading approach suggests entering a series of trades at the very beginning of the trend. In theory, one could put a single entry and hold it till the trend reversal, but scalping also implies taking profits from pullbacks/corrections. In addition, this strategy allows making money on short trends.
The strategy applies the following indicators: [Stochastic Oscillator and the Awesome Oscillator][8]. Two moving averages analyze the trend line on the hourly time frame.
The currency pair is [GBPUSD][15], and the main trading time frame is M5, the auxiliary one is H1. Trading is conducted during the European session. You can download the strategy template [here][16].
Settings of indicators:
Conditions for entering a long trade:
Analysis of H1 time frame. Both moving averages are directed upward. Red MA is above blue MA.
Analysis of M5 time frame. Stochastic was in the oversold zone (in the range between 0-20) and goes beyond the zone at the signal candlestick. Awesome Oscillator paints a green column below zero level.
The more vertically the stochastic goes outside the oversold zone, the more accurate the signal is. After all the conditions on the next candlestick are met, you can enter a trade. The target profit is about 10-15 pips; the stop can be put at the same distance or a little further.
Conditions for entering a short trade:
Analysis of H1 time frame. Both moving averages are directed downward. Red MA is below blue MA.
Analysis of M5 time frame. Stochastic was in the overbought zone (in the range between 80-100) and goes beyond the zone at the signal candlestick. Awesome Oscillator paints a red column above zero level.
The entry rules are similar. If the trend is strong, you may enter a series of trades.
Psychological levels trading suggests two scenarios: breakout of the channel border with the start of the new trend or a rebound from the border (support/resistance level) and a return to the middle of the channel, that is, to the balance level. This is a good scenario. In practice, everything may be a little different:
All these are risks for a day channel trading strategy, but not for scalping that allows you to make profits both from the channel breakout and from the price swings inside the channel. Psychological levels in this case serve as a target reference that helps you at least approximately assume the potential pivot points inside the channel.
The strategy suggests building a Moving Average “Envelope”, where the price will return. Stochastic will identify the probability of the channel’s borders breakout. Internal levels are built based on Fibonacci levels. Stochastic in this case will be a supplementary tool, moving averages, and levels with the coefficients of 61.8; 161.8; 261.8; 361.8 are combined in a single indicator, MaEnv, that you can download via this [link][17]. Moving averages in the indicator are constructed by summing 3 LWMAs with periods of 30, 50, and 100, weighted by the closing price.
Time frame - М5 (5 minutes), currency pair- [EURUSD][2]. MaEnv default setting. Stochastic settings: %К - 14, %D - 3, Slowing - 3, Prices - Low/High, Moving Average MEthod — Simple. Levels are standard (20, 80).
Conditions for opening a long position:
After the candlestick closes above the red line, you enter a trade and put a stop at a distance of about ten pips. You exit the trade when the orange line is reached (Fibonacci level 61.8).
Conditions for entering a short position:
The exit conditions are similar. Other lines are auxiliary, but if they start indicating a reversal and the profit has already covered the spread, exit the trade and wait until the price goes beyond the envelope next time. If the price has been between the red and the blue lines for a long time (from 8-10 candles and longer) or outside the red line, you do not enter a trade.
When trades are opened and closed in the shortest periods of time, trading systems with a huge number of indicators are not always appropriate. Decisions should be made in less than a minute because scalpers hunt for a profit of just a few points. Let us see how to trade repeated typical movements and streaming data using orders and pending orders.
Decisions on numerous intraday transactions must be made quickly. Also, you cannot waste time attempting to use poorly adjusted automation, where many classical indicators are late and in need of constant fine- tuning for trading on smaller time frames, such as M1, M5, M15, M30.
Psychology is also relevant here: support-resistance levels, the magic of round numbers. For example, if a quote ending with zeros is not broken at once, then most often, a rollback will follow. Other observations on this subject can be found in the bestseller How to Play and Win on the Stock Exchange by Alexander Elder.
When the price crosses 0, we determine the closing price. We place orders for entry or stop orders, taking into account the correction, which is estimated by candles whose shadows crossed the support- resistance levels. If the shadow below the closing level crossed the zeros – we choose support level and an uptrend, and if it is above - then the resistance and the downtrend.
The shadow of a five-minute candle should cross the 0 levels:
The size of the profit depends very much on the activity of the market participants within a day. Activity is usually observed during the opening of the largest exchanges and slows down after 2-3 hours. After 21:00 and in the hours before 10:00 scalpers usually do not trade.
Volume Spread Analysis (VSA) is the analysis of price movements based on volumes. The direction of the trend depends on the volume of purchases and sales of the instrument, and if the sales volumes are higher, the movement will be downward until the market participants override them with purchases, which will turn the trend upwards.
Today, trading volumes are taken into account in the analysis - as are the opening and closing prices and the high and low of the candle. Usually, the volumes are painted in the color of the candle, but you should not pay attention to this because it does not say anything about how the buyers and sellers behaved inside the candle. Volumes of Forex transactions are calculated by the number of trades - without taking into account the funds expended on each of these trades. Real data on the volume of stream trades can be found on the website of the [Chicago Mercantile Exchange (CME)][18].
The difference between the volume of buyers (ask) and sellers (bid) is called delta, and the positive difference indicates that the market is dominated by purchases, and the negative one shows that there are sales in the currency pair.
Many programs, such as [Volfix][19] or [ATAS][20] allow you to estimate the flow volumes of Ask and Bid for a certain currency pair, that is - inside each candle. Typically, these apps are not free, but they offer trial access.
Let’s say that a trend is clearly visible on the market – an uptrend or a downtrend. Prices are rising, and delta shows that sellers or buyers dominate the market. Here the scalper needs to make a trade against the trend, focusing on arriving countertrend volumes - to profit from a correction.
Volumes of sales and purchases require vigilant examination with subsequent identification of typical ones, so as not to get confused in the “abnormal” volumes, which are different for each [currency pair][21]. Therefore, the strategy needs a lot of testing before it begins to bear fruit.
The order book shows stock information on the total number of contracts and prices based on pending orders.
Some scalpers prefer to trade exclusively by the order book and do not use price charts. Levels with a large number of orders can be considered as support and resistance levels, and the basic strategy of the scalper here is to place pending orders one tick before the “strong” levels.
Do not rush to place orders before the price hits the level. Until then, orders can be rearranged or “disassembled” by orders placed on the other side. Wait until the take profit is triggered to open and close the trade when the volume is exhausted or moved.
Manual scalping is gradually replaced by scalping via MetaTrader EAs. That’s predictable: there is no point in opening trades manually when you can program a robot that will do the same automatically, based on a well-proven work strategy.
The disadvantage of using expert advisors is that they cannot consider fundamental factors and market changes. So, I recommend using advisors on specific time frames, which can be determined through testing. The best time frame for using an advisor is the time frame on which you make the most of profit-yielding trades.
What scalp expert advisor is the best? The one that yields the most profits with optimum risk levels and without permanent readjustment. If you need to optimize your advisor almost every day, search for a new one.
I recommend testing Hamster Scalping as an example for acquiring some experience in this field. Its specifics are the following:
Hamster Scalping has over 30 settings. If you need a more detailed comment on them, just let me know in the comments section.
If you have a working strategy and you want to get a scalping advisor for MT4, read the review [How to order an Expert Advisor][22]. You will learn how to work with freelancers on the MQL5 site: how to specify your technical requirements, choose a freelancer, make an order, estimate risks, etc.
How to choose the best broker for scalping? Choose the one that offers the best trading conditions and meets its commitments.
The main factors in choosing an efficient scalp broker:
Advice: Use the OpenOrderTime script to check the speed of orders execution, spreads, or slippages. [Download and install it to MT4: File/Open Data Folder][24]. Download the template into MQL4/Scripts and restart the platform. Allow automated trading by ticking the corresponding field in Tools/Options/Expert Advisors. Run the script. In a few seconds, you will have a text file with the check results in MQL4/Files.
Here’s an example of checking LiteForex’s trading conditions:
The order was opened and closed within 128 ms and 142 ms, respectively. Quite a good result for scalping. Request Price - price sent to the server. Open/Close Price - real price of execution. Acceptable deviation: no more than 0.00002. If the two values coincide, like in this case, there are no slippages. So, this is a good Forex scalp broker.
Download the script and run it when you suspect slippages or delays in the execution of orders. A screenshot of the script report will be your best argument in dealings with the support team.
LiteForex’s conditions are perfectly suitable for scalping:
Basic requirements to a currency pair suitable for scalping
For night (flat) scalping, you can trade the pair with relatively low volatility - [USDCAD][25], [AUDUSD][26]. I want to stress that the meaning of the best currency pair for scalping is subjective. The price movements depend on both external macroeconomic factors and on the FX manipulations by large investors (market-makers). That is why, at different times, different currency pairs from major forex pairs or cross-currency ones may turn to be the best for scalping. Therefore, there are a few tips on how you can select the best fx pair for scalping:
There are no recommendations regarding the best indicators and technical tools for scalping. Everything is individual here. Someone is satisfied with the MT4 standard indicators, and someone installs unique author’s tools. Trading performance depends not so much on the tools as on the ability to use them.
Scalp-trade cryptocurrencies only if their price changes 3%-5% or more over a few candlesticks under the pressure of fundamental factors.
Advantages. Compared with stocks or currency pairs, cryptocurrencies are more volatile and at the same time highly liquid. Crypto-quotes can change 1%-5% and more in a day.
Disadvantage. Margin can go up to 1%-2% of a cryptocurrency’s price.
Some advice regarding scalping cryptocurrencies:
Use the trading strategy of leading indicators for conservative scalping. The cryptocurrency market’s leader is BTC. Any fundamental news about Bitcoin affects the rest of the market. Other alts’ prices move with a slight lag. So, take BTC quotes as a reference point and open trades in TOP 15 coins (ETH, XRP, etc). As we can see on the screenshot below, all the coins have been in the green zone over the past 24 hours and in the red zone over the past week. So, guided by BTC price’s prior fluctuations, we can open trades in any of the coins.
Use the [“Pump&Dump”][28] trading strategy for high-risk aggressive scalping. Some coins may show short-term volatility of 15%-30% and more. They suit scalping the best. Read more about the strategy in our review Pump & Dump: how to take advantage of it and not be deceived.
Use the following cryptocurrency scalping indicators: spread indicators or Autochartist plugin. Trend indicators and oscillators are hardly efficient.
Here’s advice for beginner traders: pick up the least expensive cryptocurrencies from TOP-15. For example, trade volumes being the same, [ETHUSD][29] will cost 30 times less than [BTCUSD][30]. Opening a trade of the minimum volume in the Ethereum-pair, you risk a smaller deposit amount than when trading Bitcoin. If you wish to learn more about cryptocurrency contracts and spreads, click here.
What makes Scalping gold interesting is that you can earn from both technical and fundamental analysis. Gold quotes are highly reactive to the sector news and news concerning inversely correlated instruments. One can earn from gold inventory reports, changes in industrial demand, or changes in related markets. As gold is a protective asset, investors’ capital will flow to XAU if stock markets fall, for example.
Most popular gold scalping strategies in Forex:
Trading robots for gold scalping in Forex
I suggest using only manually developed robots tested both by MT4 tester and in practice. It’s not advisable to download advisors from the internet without understanding their work principles.
In contrast to indexes or currency pairs, gold isn’t traders’ main asset. Its price movements are often of psychological nature, so Fibonacci levels scalping works perfectly in the gold market. Here are its principles:
A downtrend replaces an uptrend. Let’s suppose we are in point 2 now. Stretch the Fibo grid from point 1 to point 2. The price retraces a few times from level 0.236, returning to the support level. It’s when you need to open short-term trades. For example, in points 2-7, closing trades when the price reverses. In point 8, there’s a new extremum. Stretch the grid there, and do the same in point 9. You can switch to a candlestick chart from time to time. Each trade is 2-3 candlesticks long.
Continue opening short-term trades when the price pulls back from key levels until it sets a new minimum or a trend reverses. If the trend becomes ascending, draw a new grid from the minimum to the maximum.
If you wish to know more about Fibonacci channels, check our review [What is Fibonacci retracement][31]? How to trade using this indicator?
Let’s examine another interesting trading strategy based on LiteForex’s analytical toolkit. Its advantage is that necessary analysis has already been done, and you don’t need to install indicators to search for relevant news.
Open the “Signals” tab in the “Analytics” section in your LiteForex’s Client area.
Check how fast signals are updated. As there’s a 2-3 minute lag, working on M1 time frame would be risky. So, check the signals on M5 and M15 time frames in the first place. On both time frames, advice for [XAUUSD][32] is to “sell actively”, and most indicators are red. Just in case, check the M30 time frame. The advice is “sell” there. Open a short position for 10-30 minutes.
Gold is less liquid than currency pairs, so its spread is bigger. Thus, 1-5 minute trades can be opened only during periods of local fundamental volatility, which happens rarely. However, 30 minutes are often enough for small profits.
The trade of 0.01 lots was in the market for 30 minutes and yielded 1.72 USD. So, the strategy is efficient.
The best stocks for scalping are those that are as liquid and at the same time volatile as possible. The higher volatility, the more we earn from a local price move. The higher liquidity and trading volumes, the faster we can trade at the best price without slippages.
How to choose the best stocks for scalping?
Option 1. Visit the site of [Tradingview][33]. Sort stocks by volatility and liquidity in decreasing order. Pick the company that will be one of the TOPs in both parameters. You can use Excel for a faster search. You can also sort companies by volatility and trade volume in the same window, or you can sort other countries’ stocks.
Option 2. Choose Shares NYSE in the [“Trade”][34] section and sort them by volatility.
A professional scalper’s secrets:
Does one need to place Stop Loss and Take Profit in scalping? As theory suggests, stop loss should be placed in any circumstances, but you will lose time then. However, you don’t have much time in scalp trading. If you’re glued to the screen, there’s no need to place pending orders. If you need to leave your workplace for some time, then place stop loss.
Advantages of forex scalping strategies:
I would say the biggest advantage of scalp trading is having to learn it. Due to high-frequency trading, the trader learns to better understand the principles of entering and exiting trades, the nature of the market and learns to develop intuition. After mastering scalping that is far more complex, intraday and long-term strategies will seem easier.
Disadvantages of forex scalping strategies:
To make profits from scalping, one needs to use high leverage, which significantly increases the risks. But still, despite all the drawbacks of scalping trading, forex scalping is, first of all, satisfaction and excitement. That is why many traders like forex scalping so much.
Is scalping a good strategy?
There aren’t good or bad strategies. There are strategies inappropriate to an asset or a market situation.
Scalping advantages:
Scalping drawbacks
So, scalping is a good strategy for active, stress-resistant traders who can revel in sitting in front of the monitor for hours.
How many points can I earn a day?
It depends on how much time you will spend trading and how efficient your trades will be. Here are some figures:
In an ideal scenario, you can earn 300-350 points a day. In a real one - 50-80.
Don’t hold on to these figures: form your own strategy which will be the most convenient to you.
Trading scalping is one of the Forex trading strategies suitable for both currency pairs and other assets. Traders can scalp in flat or trending markets. Some people consider it to be highly profitable; others say it is highly risky. In any case, before you start scalping, any Forex scalper strategy needs to be practiced and improved on a demo account. I hope this practical case study has helped you answer the questions you had. If it hasn’t, write your questions in the comments, and we will try to answer them together. I also invite you to discuss the best optimal and profitable forex scalping strategies in the comments, or share them with beginners! I wish you successful trading!
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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.
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